An integrated EU energy market is the most cost-effective way to ensure secure and affordable supplies to EU citizens and mitigate climate change. A completed internal energy market could bring net economic benefits between 16 and 40 billion euros each year. Substantial progress has been achieved to date but in order to reap full benefits more investment is needed in strategic cross-border infrastructure, and developing smart grids for electricity. Common and transparent rules on how the energy grids are used need to be put in place. These are the main points of the Communication on the challenges for completing the internal energy market released by the European Commission today.
Günther H. Oettinger, Vice-President of the EU Commission responsible for energy said: "If energy markets are well connected and common rules are in place there's not much room left to use energy supplies as a political instrument. With proper price signals and sufficient infrastructure, energy is produced where it's cheapest and sent to where it is needed. All this translates into secure energy supplies all over Europe and lower bills for consumers."
What has been achieved to date
- The integration of the EU's energy markets is delivering tangible results mainly on the wholesale markets. In particular,
- between 2008 and 2012wholesale electricityprices declinedby one-third and wholesale gas prices remained stable;
- consumers havemore choiceamong energy suppliers competing through lower prices and better services than ever;
- manymissing links between countries have been completedor are under construction;
- cross-border tradebetween most European countries has increased. For gas, cross-borderpipelines are being used more efficientlythanks to common rules on the use of gas networks;
- the legal framework makes sure that energy companies cannot exclude competitors from access to pipelines or withhold the construction of important infrastructure.Other ruleshelp guarantee that trading on wholesale markets is fair and prices cannot be manipulated.
What still needs to be done
Further steps are required to enable the proper functioning of the internal market which allows companies to compete on an equal footing, facilitates the integration of intermittent renewable energy and through correct price signals ensures that energy is produced where it is cheapest and that the most cost-effective investment decisions are taken. For this it is crucial that:
- moreinvestments in infrastructure, including in smart grids,are made urgently.In gas, investments should focus on ending the isolation of the Baltic States and the diversification of supply in many Central-Eastern and South-Eastern Member States. In electricity, linking the grids of the Iberian Peninsula, the Baltic region, Ireland and the United Kingdom better with the EU should be tackled as a priority. By 2020 three-quarters of the EU's Projects of Common Interest should be completed;
- electricity infrastructure is used more efficiently and its operation is based onthe same set of simple, harmonized rulesacross Europe. The Commission is preparing to adopt these rules in the coming months;
- governments intervene only when secure energy flows cannot be guaranteed by the market. Otherwise they mayundermine investments in infrastructure and energy efficiency and have a negative effect on consumer bills.The Commission has addressed this issue with its guidelines from November 2013;
- theregional approachis strengthened, which will be essential for completing the internal market as it can bring results faster and is better suited to address local issues.
- consumers become active playersin the energy markets. Also, retail and wholesale markets need to be better linked to allow the benefits to become visible also on retail level.
Interim report provides first full dataset on energy costs and subsidies for EU28 across power generation technologies
The functioning of energy markets and the size and effect of government interventions has been the subject of debate for years. To date however, a consolidated dataset for government interventions in the power market of the European Union has been missing. This is why the European Commission has commissioned a study that aims at helping to close the knowledge gap by quantifying the extent of public interventions in energy markets in all 28 Member States. Today we present the interim results of the external study on "subsidies and costs of EU energy".
The Commission invites energy sector experts, stakeholders, academia and Member States to comment on these results with a view to assist in advancing the debate and refining methodologies and analyses and, where appropriate, in contributing additional data, for example as regards historical subsidies.
The interim report presented today collects a hitherto not existing set of data on costs and subsidies across the various generation technologies in the electricity sector and across all EU Member States. It represents a first concrete deliverable following the Communication "Delivering the internal electricity market and making the most of public intervention" from November 2013.
Vice-President Günther H. Oettinger responsible for energy said: "Together with the Commission's earlier report on drivers for energy prices, we now have a set of data on subsidies and costs in the field of energy that is more solid and comprehensive than anyone before. We are now better informed about the size of public subsidies in recent years and the costs for power generation across all technologies. But the task is not yet completed. This can only be a first step and there are still gaps in our knowledge. We have to continue to work on filling these gaps. More research is needed, in particular on historical subsidies in the energy market in all EU Member States and the EU overall."
The results show that in 2012, the total value of public interventions in energy (excluding transport) in the EU28 were between €120-140 billion. Unsurprisingly, and given the efforts to expand the share of renewable energy in the EU’s overall energy consumption, the largest amounts of current public support in 2012 went to renewables, in particular to solar (€14.7bn) and onshore wind (€10.1bn), followed by biomass (€8.3bn) and hydropower (€5.2bn). Among conventional power generation technologies, coal received the largest amount in current subsidies in 2012 with €10.1bn, followed by nuclear (€5.2bn) and natural gas (about €7bn). The figures specifying support across technologies do however not reflect the free allocation of emission certificates nor tax support for energy consumption. Including these factors would reduce the gap between support for renewables and other power generation technologies. The study also discusses the order of magnitude of historical interventions, which are considerable for coal and nuclear. Further work is however needed to arrive at more solid estimates of historical subsidies.
The interim report also presents figures on the cost competitiveness of the different power generation technologies. The estimated ranges reflect costs of new power generation without public intervention (levelised costs). Costs for producing one MWh of electricity from coal are in a range around €75. Electricity from onshore wind is generated at only somewhat higher costs. Costs for power from nuclear and natural gas are in comparable ranges around €100/MWh. Solar power costs have fallen considerably since 2008 to about €100-115/MWh depending on the size of installations.
The interim report also presents estimates on external costs across power generation technologies. These are costs that are not reflected in market prices, such as costs of environmental and health impacts and the impact of climate change. The methods for quantifying external costs come with a high degree of uncertainty, and the report only aims to identify orders of magnitude for external costs. It puts the figure of external costs of the EU’s energy mix in 2012 at between €150 and 310 billion.
http://www.neurope.eu/article/common-rules-and-infrastructure-needed-complete-energy-market